Inheritance Tax Changes: What Overseas Property Owners Need to Know

A holiday home abroad is meant to be simple. A place in the sun, somewhere to escape the Yorkshire weather, and perhaps an asset to pass on to the family. In reality, the moment you buy property overseas, you are no longer dealing with one legal system; you are dealing with two.

For many years, UK Inheritance Tax exposure on overseas assets was largely framed around domicile. That changed from 6 April 2025. The UK has moved away from domicile and deemed domicile for Inheritance Tax purposes and now looks instead at whether someone is a long-term UK resident.

That matters. If you are long-term UK resident, your worldwide assets, including that villa, apartment or farmhouse abroad, may still fall within your UK estate for Inheritance Tax purposes. But the property itself will also answer to the law of the country where it is situated. Those two systems do not always agree, and when they do not, it is usually the family left to sort it out.

In England and Wales, you can leave your estate to whoever you choose. Many popular destinations don’t work the same way. France, Spain and Italy have succession rules that can protect certain family members, especially children, regardless of what your English will says.

Don’t assume your UK will automatically cover everything overseas. It may not be recognised as expected, or may create problems with local lawyers, notaries or tax authorities. The solution is often a separate local will for the overseas property, carefully drafted alongside your UK will so the two don’t accidentally cancel each other out. In some cases, a single worldwide will may work better; it depends on the countries, assets, and local rules involved.

Broadly, your non-UK assets can fall within UK IHT if you’ve been UK tax resident for at least 10 of the previous 20 tax years.

This catches families who assume an overseas property sits outside the UK tax net. It may not. With the nil-rate band frozen at £325,000, an overseas property can easily push an estate into a 40% UK IHT charge, and the country where it’s located may levy its own succession or death taxes too. Double Taxation Treaties can help prevent being taxed twice, but they must be applied correctly, never assumed.

Internationally mobile families take note: someone who leaves the UK can remain within the IHT net for up to 10 tax years afterwards, depending on their residence history. Retiring abroad doesn’t necessarily end UK exposure; the key questions are both “where is the property?” and “how long were you a UK resident?”

A UK Grant of Probate doesn’t automatically let executors sell or transfer property overseas. Many countries require a separate local probate process. Some allow the UK grant to be “resealed” or recognised locally; others require an entirely separate procedure. Either way, this can mean foreign lawyers, translations, tax filings and months of delay while bills, insurance and maintenance still need paying.

Owning a holiday home abroad isn’t a bad idea; it’s a plan worth getting right from the start. That means understanding local succession rules, choosing between a worldwide or separate wills, reviewing your residence history under the new rules, and knowing your family’s tax and probate exposure in advance.